Star stock-picker Terry Smith’s equity fund downgraded by ratings firm

The UK’s largest shares-focused investment fund has been downgraded by a leading ratings firm after a “number of missteps” by the star stock-picker Terry Smith. Morningstar demoted the £25bn Fundsmith Equity fund’s rating from gold to silver, saying the manager’s ill-timed sale of shares in large companies including Amazon and the software firm Adobe had hurt performance. The downgrade will be a further blow for Smith. Fundsmith profits tumble 14% to £50bn in the year to March 2023, according to the latest available filings, as customers started to pull money from the fund. The decline in profits resulted in Smith’s pay falling for the first time since 2016, to £31.1m, down from £36.4m a year earlier. Daniel Haydon, a Morningstar analyst, said in the ratings firm’s report: “While Smith’s careful sell discipline has long been an edge, some questions have become apparent more recently.” Smith has admitted to bad timing in relation to the sale of four major stocks, the report noted. “In some cases (Adobe and Amazon.com) – having seen their share prices rise significantly after selling – he now thinks he acted too soon despite feeling his fundamental analysis stacked up at the time,” it said. “In retrospect,...

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